April 5, 2012 / 1:12 PM / 5 years ago

UPDATE 1-Turkey launches incentives to cut c/a gap

(Adds details, background)

ISTANBUL, April 5 (Reuters) - Turkish Prime Minister Tayyip Erdogan announced a new incentive scheme on Thursday aimed at reducing Turkey's gaping current account deficit by encouraging local production of some previously imported goods.

The current account deficit is seen as Turkey's main economic weak point in an otherwise booming economy. The current account deficit stood at 10 percent of GDP in 2011 but is expected to decline to 8 percent this year.

The new scheme will include tax cuts, VAT (value added tax) exceptions and other encouragement for large, strategic and regional investments, Erdogan told a news conference.

Priority will be given to investments in sectors such as aerospace, defence and automotives, he said. Tax incentives for investors could be applied to income from all activities according to the new scheme, Erdogan said.

Turkey will be divided into six geographical regions and the incentives will be distributed according to those regions' level of economic development, Erdogan said.

Turkey's eastern and southeastern provinces are generally poorer than those in the west of the country and Erdogan said the new scheme aimed to address those disparities.

The incentives will apply from January 1, 2012.

Erdogan said strategic investments, such as high-level technology, research and development and high-value investments that had a potential to increase Turkey's competitiveness abroad would be given the most support.

There will be a 50 million Turkish lira ($27.87 million) minimum investment threshold in order to take advantage of the incentives, Erdogan said. ($1 = 1.7942 Turkish liras) (Writing by Seda Sezer; editing by Patrick Graham)

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